I need to explain in words the effect/solution of this problem:

Topic: You have a client that is considering trading machinery with another company. Although the machines are different from each other, you believe that an assessment of expected cash flows on the exchanged assets will indicate the exchange lacks commercial substance. Your client would prefer that the exchange be deemed to have commercial substance. Here are the facts: Round Company Square Company Original Cost $100,000 $150,000 Accumulated Depreciation 45,000 80,000 Fair Value 80,000 120,000 Cash received (paid) (40,000) 40,000

Requirements: Write a memo to Nash Sheen, the controller of Round Company (your client) indicating and explaining the dollar impact on the financial statements of treating the exchange as having, versus lacking, commercial substance